Big Data's double-edged sword: Better drug marketing, bigger SG&A cost cuts

Big Data could be a big deal for Big Pharma's commercial operations. It could help top drugmakers slash another $35 billion-plus in costs over the next several years, to keep margins up. But it's small drugmakers that could benefit most strategically, a new report finds.

According to a study from the IMS Institute for Healthcare Informatics, pharmaceutical companies now have a short list of reasons why they need to get their acts together, data-wise. Payers want more evidence that their products not only work as promised but also deliver better (and cheaper) outcomes for patients. That means more digging into patient records to analyze what's working and forging technological ties to patients to make sure therapy goes as planned--not to mention generating the data payers want for proof.

Meanwhile, a switch to specialty drugs requires highly targeted marketing, to make sure the right patients are treated. And thanks to a proliferation of health information, patients as well as payers want more input into doctors' choice of prescription, so drugmakers need to find those patients--and find ways to communicate with them, whether through mobile apps or social media or reimbursement counselors.

For companies as a whole, Big Data's promise is a tighter, better informed commercial organization better equipped to negotiate with increasingly tight-fisted payers. It could help marketers reach the right doctors and patients, with the right materials and assistance. And it could help them save the $36 billion they need to maintain operating margins in the neighborhood of 25%.

For marketers themselves, the changes could be painful. How has Big Pharma preserved its margins so far? Cost cuts. How will drugmakers keep them up over the next few years? More cost cuts. And those future cuts are likely to take a big toll on sales and marketing organizations. In a survey of leading drugmakers, IMS Health found that 40% of respondents expect cuts to commercial operations of more than 10% over the next three years, with more than a fifth looking for cuts of at least 15%.

But if those cuts must claim jobs, then putting data to work can at least help marketing managers reduce costs in a more strategic way, IMS Health says. Rather than "crude" across-the-board headcount reductions and brand-budget cuts, companies can spend their money on the things that are most important, strategically, and those that contribute most to actual sales--and chip away at the rest.

For instance, marketers can use data to gauge the effectiveness of launch techniques and marketing campaigns, and scrap those that don't work. They can figure out which doctors like to learn about which drugs in which way--face-to-face meetings, email, e-detailing, and so on--and focus their resources accordingly.

Sadly for Big Pharma, switching to a data-driven approach to sales and marketing could be costly. Drugmakers have sunk large sums of money into in-house data systems that do give them a competitive advantage, marketing-wise, IMS Health says. But those systems may not be able to play with cloud-based data analysis. So, smaller drugmakers may be better able to take advantage of cloud technologies.

And as they do, Big Pharma's data-driven competitive advantage could be lost. That means smaller companies may be able to use cloud applications to market their first drugs on their own--without signing on with a major marketing partner, the IMS report says.

"As these technologies become more widespread, accessible through the cloud, and proven, they will also provide small and mid-sized companies a greater opportunity to compete on a level playing field with the traditionally better-funded commercial operations of large companies," the report states. And that could change drug marketing for good.

- see the release from IMS Health

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